Tax incentives can exacerbate risk of tax losses from transfer price of businesses in the SEZs: Oxfam

At the seminar "Discussion on tax incentives in the Special Economic Zones (SEZs)," recently held in Hanoi, Nguyen Thu Huong, senior manager of Oxfam's governance program, said that the tax incentives in SEZs are not really appropriate and it needs to be reviewed in the draft law.

Huong said that the difference in taxation is one of the causes for greater global inequality while citizens and small businesses are carrying tax burdens on behalf of large corporations.

Based on statistics released by the General Statistics Office in February 2017, while profits of Vietnam foreign-invested enterprises accounted for 45.9 per cent of that gained by all types of companies, it payed the lowest tax.

Oxfam’s report on assessment of Vietnam's tax incentive policy in 2016 shows that Vietnam's tax incentives and exemptions for large enterprises and projects did not work as expected. At the same time, it resulted in budget losses as well as negative environmental and social impacts.

Therefore, from the perspective of tax justice, Oxfam representative recommended that Vietnam National Assembly and the Government carefully review tax incentives from Articles 40 to 43 of the draft Law on Special Administrative and Economic Units because of some reasons.

Firstly, tax incentives in the draft are unnecessary as the incentive fields are not new compared to other laws. The priority industries proposed by draft law are almost overlapping with priority sectors of high-tech zones and other economic zones.

The three new sectors including casino, resort and real estate have already attracted investment without SEZs law. According to the report of Quang Ninh province, the projects in these fields have attracted about $1.6 billion from 2015.

In addition, other subjects that are offered tax incentives in the draft including research & development, start-up businesses and innovative research centers have unstable business results, so the short-term tax exemption may not bring much benefit to this group of investors.

Secondly, tax incentives can exacerbate the problem of tax losses from the transfer pricing. According to Oxfam representatives, developing countries including Vietnam lost roughly $100 billion annually due to tax avoidance of multinational corporations.

More importantly, Oxfam representative said that the World Economic Forum's Global Competitiveness Report (2017-2018) pointed out that the three most important factors were not tax incentives but infrastructure, human resource quality and social stability.